Texas L&H Practice Questions: Health Insurance Basics

Health Insurance Basics & Individual Policies TX-LH-06-423

David recently moved to Texas and enrolled in a new health insurance plan. He learns that for his plan, he must select a Primary Care Physician (PCP) from a specific network, and all specialist visits require a referral from his PCP. If he goes to an out-of-network provider on his own, the services will not be covered at all, except in emergencies. What type of managed care plan does David most likely have?

Exclusive Provider Organization (EPO) Point of Service (POS) Health Maintenance Organization (HMO) Preferred Provider Organization (PPO)

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The answer is C: Health Maintenance Organization (HMO)

David's plan features, such as requiring a PCP, needing referrals for specialists, and having no coverage for out-of-network care he seeks on his own (except emergencies), are characteristic of a Health Maintenance Organization (HMO). A Texas HMO must still approve and pay for a referral to a non-network provider when a medically necessary covered service is not available in its network (Insurance Code §1271.055). PPOs offer more flexibility to see out-of-network providers (though at a higher cost). POS plans combine aspects of HMOs and PPOs, allowing out-of-network care with referrals. EPOs are similar to HMOs in network restriction but may not always require a PCP or referrals for specialists within the network.

Source: Insurance Code §1271.055

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Health Insurance Basics & Individual Policies TX-LH-06-441

Patricia enrolls in a managed care plan in Houston. The plan covers only in-network providers, except in emergencies or when no network provider offers a medically necessary service, but she does not have to choose a primary care physician and can see in-network specialists without a referral. Which managed care arrangement most closely matches Patricia's plan?

EPO HMO Indemnity PPO

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The answer is A: EPO

An Exclusive Provider Organization (EPO) limits coverage to in-network providers like an HMO, paying out of network generally only in an emergency or when a medically necessary service is not available from a network provider (Insurance Code §§1301.0052, 1301.0053). Like a PPO, it usually does NOT require a PCP or referrals to see specialists. PPOs allow out-of-network coverage. HMOs require both a PCP and referrals. Indemnity plans have no network restrictions.

Source: Insurance Code §1301.0052

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Health Insurance Basics & Individual Policies TX-LH-06-464

Marcus purchases a 'dread disease' policy in Texas. Which statement most accurately describes how this policy differs from a broader critical illness policy?

Dread disease policies cover any serious illness; critical illness is narrower. Dread disease policies cover only accidents, not illnesses of any kind. Dread disease policies cover only one or a few named diseases, often cancer. There is no difference — the terms are interchangeable in Texas law.

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The answer is C: Dread disease policies cover only one or a few named diseases, often cancer.

A dread disease (or specified disease) policy provides coverage for only one specific disease or a very limited list of diseases — most commonly cancer. A critical illness policy is broader, covering a larger list of named conditions (heart attack, stroke, kidney failure, organ transplant, etc.). Both are limited benefit policies and not substitutes for major medical.

Reviewed in our October 2026 Texas fact-check.

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Health Insurance Basics & Individual Policies TX-LH-06-479

Felipe purchases a critical illness policy that lists cancer, heart attack, stroke, kidney failure, and major organ transplant as covered conditions. He suffers a moderate concussion in a car accident. Will the critical illness policy pay?

Only if the concussion lasts more than 6 months. No — a concussion is not a listed covered condition. Yes — injuries from any accident are covered. Yes — concussions are listed as critical illnesses.

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The answer is B: No — a concussion is not a listed covered condition.

Critical illness policies only pay benefits when the insured is diagnosed with one of the SPECIFICALLY LISTED covered conditions. A concussion is not among the covered conditions in Felipe's policy, so no benefit is paid. Critical illness policies are narrowly defined — buyers must read the schedule of covered illnesses carefully.

Reviewed in our October 2026 Texas fact-check.

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Health Insurance Basics & Individual Policies TX-LH-06-492

Carlita is single and self-employed. She has both a long-term disability policy and an individual major medical plan. After a serious car accident, she is hospitalized and cannot work for 4 months. Which combination of benefits is MOST accurate?

Major medical pays the bills; disability replaces part of her income. Major medical pays both her hospital bills and replaces her income. Long-term disability pays her hospital bills, not major medical. Neither policy pays, because both exclude accident-related claims.

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The answer is A: Major medical pays the bills; disability replaces part of her income.

Major medical insurance covers medical expenses (hospital bills, surgery, treatment). Disability income insurance replaces a portion of lost income when the insured is unable to work due to illness or injury, after the elimination period is satisfied. They serve different functions and do not overlap.

Reviewed in our October 2026 Texas fact-check.

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Texas Life & Health: Health Insurance Basics & Individual Policies

Marcus purchases a 'dread disease' policy in Texas. Which statement most accurately describes how this policy differs from a broader critical illness policy?

Felipe purchases a critical illness policy that lists cancer, heart attack, stroke, kidney failure, and major organ transplant as covered conditions. He suffers a moderate concussion in a car accident. Will the critical illness policy pay?

Carlita is single and self-employed. She has both a long-term disability policy and an individual major medical plan. After a serious car accident, she is hospitalized and cannot work for 4 months. Which combination of benefits is MOST accurate?

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